how to read volume

how do you read volume?

more specifically, when is high volume bullish? can high volume on a decline be bullish? is high volume at a high bullish?


compare these two charts, is either bullish or bearish based on combination of volume and price action, or does volume add no additional information:

high volume at high, sideways price action

http://stockcharts.com/h-sc/ui?s=KMP&p=W&b=5&g=0&id=p66566533380

high volume at low

http://stockcharts.com/h-sc/ui?s=NCQ&p=W&b=5&g=0&id=p98939121824

 

Volume is neither bullish nor bearish; it is simply an illustration of the amount of trading activity. Bullishness or bearishness is reflected in the behavior or price. If price goes up, bullish, i.e., demand is greater than supply. Down, bearish: supply is greater than demand.

 

the first chart is an example of sideways price action, with high volume. the question is how the high level of volume is to be interpreted relative to the price action.

 

volume alone is useless IMO. Bots go haywire sometimes printing high volumes.

Looking at price candle with volume bar has some good use.

Say the price keeps falling and then you see a very narrow down price bar with high volume, it could mean all the selling was absorbed by buyers.

 

is one bar enough? takes more than one bar to form a pattern. is there any bottoming pattern that suggests incremental supply/demand is coming from buyers?

 

This information can be inferred by just looking at the price bar, without the volume. That's the point DbPhoenix is making in the post above.

Who else absorbs the selling if not the buyer?

Gringo

 

A single bar, or even bars (pattern) is not conclusive, unless you read the proper market context of that period. If the market context is favorable to that of the pattern you're looking for, then you have a higher chance of success.

Like DB has just said, volume only indicates amount of activity. For a buyer to exist, there must be a seller. If there's an imbalance of buyers vs sellers, then it would reflect in price. Having said that, more volume means, more participants, which in turn, means that more traders regard it as an important price level, and there's a higher chance that price would move.

Happy Holidays,
Schaefer

 

The first chart, in my view, is not a range – rather a consolidation… I think the term is pennant or symmetrical triangle

Anyway – price is consolidating – meaning neither side is in control

With the increased volume present – there’s a fight ensuing to figure out a winner

============

Second chart – volume came in / price stopped going down – at least for the moment

Next two bars – could be a PB… or reversal – no way to tell (at the moment)

Once (assuming is does) price reached (pb to) the TL – I’d be watching to see if volume came back in to resume the down move – or not

eta;
I would also watch to see how price acted @ the 50% level of that last big down bar - again assuming it got there

And, based on the last 3 bars - there is also an up TL - watch to see if it keeps being respected


jmo.... (in this case o = observation)

RN

 

If you're referring to the period during which price begins to move sideways, i.e., early 2012, you'll note that there's "high" volume in early March. To understand what this "means", look at price: a lot of activity and the downmove is not only stopped in its tracks but reverses somewhat. This means that buyers came in to the market to support the price (you know this because price reversed). This state lasted for seven weeks. When sellelrs pushed price down at the beginning of June, buyers came in again to support the price. You know this (a) because of the increase in activity and (b) because price halted and reversed.

Price then rose thereafter for several weeks on unremarkable volume. This means that demand was relatively unimpeded, i.e., sellers didn't care. When sellers began to care, they retarded the advance and price again moved sideways. In early November, sellers pressed hard but buyers pushed back hard, hence the high volume and the reversal. Sellers then backed off and allowed price to rise again in December and January, perhaps because they wanted higher prices before lightening their positions.

And so on.

 

There are at least three, all of which have to do with imbalances between supply and demand. Two occur as a result of climactic action and resolve themselves as either (1) a V reversal or (2) a climax followed by a test of the "bottom". The third occurs in a lateral base in which price reaches equilibrium and then perhaps prepares to advance. The latter is called "accumulation". If you want to know how to detect it, search the Wyckoff Forum at TL using my name and "accumulation". It's too much to do over again here, at least for me.